Deutsche Glasfaser Group GmbH, Re

At the convening stage of a scheme of arrangement, the court need only identify any obvious jurisdictional impediment. It must be satisfied that the company falls within Part 26 of the Companies Act 2006, that the proposal is a compromise or arrangement involving some element of give and take, and that no apparent roadblock will prevent later sanction.

For class composition, creditors may meet in one class where their rights are not so dissimilar as to make consultation in a common interest impossible. Minor differences, consent fees, backstop arrangements and participation rights do not necessarily fracture a class. Notice is fact-sensitive, and the court may take account of the creditor constituency, existing support and urgency.

Deutsche Glasfaser Group GmbH, a German fibre-optic group holding company, sought an order under section 896 of the Companies Act 2006 convening a meeting of scheme creditors to consider a restructuring scheme under Part 26.

The proposed recapitalisation involved the bifurcation of existing senior debt, new super-senior financing and related implementation arrangements. The company faced an imminent liquidity shortfall and relied on a German insolvency process as the comparator. The issues were the adequacy of notice, jurisdiction, whether the proposal was a compromise or arrangement, whether the creditors could vote in a single class, and practical arrangements for the meeting.

The application was granted. The court approved the draft order, subject to amendments concerning creditors who missed the attendance deadline and the possibility of returning to court if outstanding documentation issues were not resolved.

1. Notice. The requirement for sufficient notice is open-textured and depends on the circumstances. Nineteen clear days was sufficient here, having regard to the creditor constituency, the extensive prior negotiations, the very high level of creditor support and the imminent liquidity shortfall. The court considered the position of creditors who had not locked up their support.
2. Jurisdiction. At the convening stage, the inquiry is limited. The court must be satisfied that the company falls within Part 26, that the proposal is a compromise or arrangement within section 895(1), and that no apparent jurisdictional impediment or roadblock will prevent the court from exercising its sanctioning discretion. The English-law governing provisions and exclusive English jurisdiction clauses supplied a sufficient connection for the German company. Expert evidence also provided compelling support for likely recognition in Germany.
3. Compromise or arrangement. The court does not assess the adequacy of the give and take at this stage. It is enough that the transaction contains some element of give and take rather than mere surrender or forfeiture. The proposed restructuring plainly met that requirement.
4. Class composition. The creditors’ rights in and rights out were not materially different. Participation in the new super-senior facility, the consent fees and the backstop fees did not constitute fracturing elements. Those arrangements were available generally or were immaterial in the context of the expected recoveries and comparator.
5. The court’s view on class composition at the convening hearing was not ordinarily binding at sanction, although the level of support made a different conclusion very unlikely. The meeting was therefore directed to proceed as a single-class meeting, subject to final procedural arrangements.

not stated in the judgment.